Hospital and Health System M&A Transactions

Addressing the Workforce Blind Spot in Hospital and Health System M&A Transactions

Our Thinking / Healthcare /

Addressing the Workforce Blind Spot in Hospital and Health System M&A Transactions
Calendar12 December 2018

With massive change reverberating through the US healthcare industry, Mercer research indicates three out of four healthcare organizations will be involved in a merger and acquisition (M&A) in the next two years. So what are the most pressing people concerns you should be prepared to address in these transactions? To find out, Mercer surveyed business leaders, senior executives and HR professionals across the industry, a majority of whom had participated in some type of M&A transaction within the past 5-7 years. Outside of the traditional focus on compensation and benefits, the issues that rise to the top are:

  1. Culture/operating environment: 71% of respondents, across all types of healthcare organizations, said culture is a critical issue. We recommend conducting an assessment during due diligence to identify culture differences that could have a business impact. 

  1. Leadership effectiveness: The most prevalent demographic workforce trend in the healthcare industry is the aging global workforce, resulting in large numbers of senior managers retiring. Thus, leadership development is a critical priority for both pre- and post-deal success. 

  1. Talent attraction and retention: Identifying top talent and utilizing retention bonuses were key features of 71% of the transactions Mercer examined. Further, in our 2018 Talent Trends research we found that “fair and competitive compensation” is the top priority for healthcare employees, and the biggest differentiator of EVP – Employee Value Proposition. Given this, it’s not surprising that benchmarking with both comprehensive (e.g., inclusive of shift differentials) and local-market compensation data is a critical factor for success in transactions. 

  2. Workforce planning: Hospitals and health systems already face acute labor shortages in certain positions and skills. Workforce planning capabilities are essential for staffing high-demand and limited resources across key roles in the organization. Unfortunately, integrated workforce planning requires a professionally committed and dedicated team, which is currently lacking in many healthcare systems. Merging without taking action to harmonize can erode employee engagement and satisfaction, and lead to increased risk to patient outcomes. 

  3. HR technology systems: Integrating HR technology is often the long pole in the tent, with integration work extending well beyond the transaction close date. These efforts can pay enormous dividends by enabling truly integrated people capabilities. Close to 60% of respondents indicated they had not fully integrated HR programs and/or functions in the wake of a transaction. Unfortunately, this typically erodes deal value and decreases agility for future deals. 

Ensuring an early focus on these five key factors is the first step in conducting successful and seamless M&A transactions. For more healthcare insights, visit https://mercer.healthcare-workforce.us. 

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